2 Stocks Hit By Amazon's One-Day Delivery News

TGT's drop runs counter to the retail stock's longer-term trend

Apr 26, 2019 at 2:17 PM
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While the broader equities market is struggling for direction this afternoon, a number of stocks are getting hit on Amazon's (AMZN) plans to make one-day delivery standard for Prime members, with Bernstein analyst Brandon Fletcher suggesting, "this is about making it more expensive to catch up" to the e-tail giant. Here's a closer look at how retailer Target Corporation (NYSE:TGT) and grocery store chain Kroger Co (NYSE:KR) are moving on the news.

Target Stock Finds Support During Slip

Target stock is down 5.6% to trade at $77.20, pacing toward its worst week since Dec. 21. Heading into today's trading, the shares were climbing higher atop a trendline connecting lower lows since late December, and topped out at a five-month high near $84 earlier this week. The $75 region emerged as a foothold earlier, which is home to TGT's 80-day moving average and a 38.2% Fibonacci retracement of its December-through-April rally.

Options traders have been more bullish than usual toward Target. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TGT's 10-day call/put volume ratio of 4.44 ranks in the 95th annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

Those purchasing options are encountering relatively cheap premiums at the moment. TGT stock's Schaeffer's Volatility Index (SVI) of 21% ranks in the 11th annual percentile, meaning near-term options are pricing in low volatility expectations.

Kroger Options Traders Keep the Faith

The shares of Kroger are off 3.1% to trade at $24.96. It's been a rough stretch for KR stock following a March 7 post-earnings bear gap, with the highs of $26.10 from that day emerging as a ceiling in recent weeks. The security's 50-day moving average has descended into this region, as well, and could reinforce resistance in the near term. Year-to-date, KR is off 9.1%.

KR bulls have held firm, with the equity's 10-day call/put volume ratio of 4.44 perched in the elevated 95th percentile of its 12-month range. Echoing this is Kroger's Schaeffer's put/call open interest ratio (SOIR) of 0.97, which registers below 84% of all comparable readings taken in the past year. In other words, short-term speculators are more call-heavy than usual.

It's a trend continuing today, with around 9,550 calls and 6,700 puts on the tape -- 1.7 times what's typically seen at this point in the day. The weekly 4/26 25-strike call is most active, and it looks like day traders may be buying to open the options for a volume-weighted average price of $0.20. If this is the case, call buyers will profit on a move above breakeven at $25.20 (strike plus premium paid) by expiration at tonight's close.

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